Namibian Supreme Court rules Competition Commission has no Jurisdiction Over Medical Aid Fund Members

By AAT contributors Charl van der Merwe and Aurelie Cassagnes

On 19 July 2017, the Namibian Supreme Court, was tasked with settling a long standing dispute (not the first of its kind) as to whether or not the Respondents fell within the jurisdiction of the Namibian Competition Commission (NCC) in terms of the Namibian Competition Act of 2003 (Namibian Act). The case was brought on appeal by the Namibian Medical Aid Funds (NAMAF) and its members (collectively referred to as the Respondents).

After an investigation lasting a couple of years, the NCC announced in November 2015 that it had considered the behaviour of the Respondents in setting a “benchmark tariff” and found that the practice amounted to Price Fixing in contravention of section 23 of the Namibian Act. The Respondents, in pre-empting the commission’s planned litigation, disputed the NCC’s jurisdiction. The High Court found in favour of the NCC which led to the appeal by the Respondents to the Namibian Supreme Court.

Benchmark tariffs, in short, is a recommended fee, payable to doctors, at which medical aid expenses and consultations are covered. The issues surrounding benchmark tariffs has sparked debate across Africa with ‘those for’ arguing that without them, the medical profession would be “nothing short of economic lawlessness” whilst critics argue that it is “quietly killing off the health-care profession”.

The Namibian High Court, in finding against the Respondents, confirmed the NCC’s jurisdiction over the matter and ruled that determining and recommending a benchmark tariff for medical services was unlawful because it amounted to fixing a selling price. The court, in making its decision, held that “The funds’ activities in formulating a benchmark tariff were not ‘designed to achieve a non-commercial socioeconomic objective’. Rather, it was to produce and distribute wealth.” (Own emphasis)

The main issue to be decided on appeal by the Namibian Supreme Court, however, was not whether the benchmark tariff amounted to a contravention of the Namibian Act, but rather, whether the NCC had jurisdiction over the matter. In other words, whether the Respondents were included under the definition of ‘undertakings’ in terms of the Namibian Act.  Chapter 1 of the Namibian Act provides that:

An “’undertaking’ means any business carried on for gain or reward by an individual, a body corporate, an unincorporated body of persons or a trust in the production supply or distribution of goods or the provision of any service”

The Namibian Supreme Court found that the Respondents were not a “business carried on for gain or reward” and, therefore, were not subject to the provisions of the Namibian Act. As such, the Namibian Supreme Court overruled the High Court’s decision, leaving NAMAF and its members to continue the use of benchmark tariffs.

The South African Competition Tribunal (SACT) had similarly dealt with this issue in a series of Orders during the course of 2004 and 2005 (see the Hospital Association of South Africa and the Board of Healthcare Funders of Southern Africa). In this regard, the SACT found that the relevant medical schemes (the Respondents) fell within the ambit of the South African Competition Act 89 of 1998 (South African Act) and, accordingly, imposed an administrative penalty on the Respondents for “benchmarking tariffs”.

In its consent orders, the South African Competition Commission (SACC), despite mentioning that the Respondents were “an association incorporated not for gain in terms of the company laws in South Africa”, held that the Respondents are an association of firms that “determines, recommends and published tariffs to and/or for its members; and which recommendations has the effect of fixing a purchase price

Furthermore, the SACC, condemned the ‘benchmarking tariffs system’ put in place by the Respondents and argued, despite the fact that the health care professionals were still largely free to determine their own fees, publishing these recommendations amounted to price-fixing which is a per se contravention in terms of section 4(1)(b) of the South African Competition Act.

Accordingly, the differing approaches in Namibia and South Africa come down to the interpretation of what entities fall within the umbrella of the respective Competition Acts.

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